Expanding Your Business with Growth Equity

Guest Profile

Richard Luftig – Managing Partner of Castle Placement

Richard co-founded Castle Placement in 2009, providing investment banking services and raising private equity/debt capital for early-stage and middle market companies across a wide range of industries including financial services, real estate, technology, business services, energy, and consumer and retail sectors. He has over 25 years of experience in investment banking, capital markets, real estate, proprietary investing, and alternative investments. Previous positions Richard has held include Managing Director at Ivy Asset Management Corp., a leading alternative investment asset management firm, Managing Director-Principal at Bear, Stearns & Co., where he was the head of North American Structured Credit Distribution, and Director in the Principal Transactions Group at Credit Suisse First Boston, responsible for investing the firm’s proprietary capital. Richard has a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania, and a J.D. and L.L.M. (in Taxation) from the New York University School of Law.

• Company: Castle Placement
• Location: New York, NY
• LinkedIn: www.linkedin.com/in/richardluftig/
• Website: www.castleplacement.com/
• Phone: (212) 418-1181
• Email: rluftig@castleplacement.com

Highlights

• Always consider the pre-money valuation and cost of capital when raising equity capital.
• Equity financing is best for businesses operating in industries with favorable valuation metrics.
• Venture capital and growth capital are both considered private equity – that is, equity that is private.
• A growth equity investor is investing heavily in the existing management team, as opposed to a company making an acquisition.
• An entrepreneur looking for growth equity is looking to stay and grow their business, as opposed to an entrepreneur looking to be acquired, who is usually looking to get out.
• Growth equity investors want the entrepreneur to hold a meaningful amount of equity.
• Most M&A nomenclature is not universally defined and consistently used. Much industry jargon in the investment banking and M&A industry is imprecise. For example, the terms recapitalization, fair market value, or EBITDA (e.g., adjusted vs. unadjusted) can have different meanings to different people in the industry.
• The JOBS Act loosened regulations instituted by the SEC, which has improved the ability of entrepreneurs to raise capital.
• Liquidity is the lifeblood of any healthy marketplace.

Topics Covered

• What is growth equity? [1:25]
• Is growth equity the same as a recapitalization (recap)? [1:50]
• What is a recap? [2:00]
• What types of companies is growth equity suitable for? [2:30]
• When would a company raise equity financing as opposed to debt financing? [3:30]
• What is a pre-money valuation? [6:00]
• Are most growth capital investments a minority or majority investment? [6:45]
• Is there a minority discount for a minority investment? [7:10]
• How is a growth equity investment structured differently than a venture capital investment? [8:50]
• How is growth equity different than an outright sale? [11:00]
• How much equity do most growth equity investors want? [14:00]
• How is technology changing how capital is being raised? [22:00]
• What are the most recent regulatory changes that affect how capital is raised? [26:00]
• What are digital securities? [31:15]
• Who is growth equity a good fit for? [33:30]
• What is your advice to someone raising growth equity? [35:50]

Learn More

• What’s a ‘Main Street’ vs. a middle-market company?
• M&A Basics | Why Do Business Owners Sell Their Business?
• Crossroads: Deciding to Sell Your Business vs. Doubling Down
• Should I sell my business?
• EBITDA | Definition, Formula & Example – A Complete Guide